Donor advised funds

Charitable Planning: Donor Advised Funds

KEY TAKEAWAYS

For many people charitable giving consists of writing checks and giving cash to their favorite charities throughout their lives. However, there may come a time when you want to develop a more comprehensive charitable plan based on your long-term charitable goals, your estate and tax planning objectives, and your legacy. For those individuals who want to benefit their heirs and charity at the same time or who haven’t decided to which charity they want to give, there are several good options:

1. Charitable remainder trusts, charitable lead trusts, and charitable gift annuities, each of which provide benefits to the charity and to the heirs or grantor.

2. Private foundations provide an immediate tax deduction, up to certain deduction limits, and flexibility in the timing and charitable entities to which the foundation gives.

3. Donor Advised Funds (DAFs) also provide an immediate tax deduction, up to certain deduction limits, and flexibility in the timing and charitable entities that you direct the Fund to give to.

 

DONOR ADVISED FUNDS

Let’s discuss the benefits of using Donor Advised Funds. These Funds are established through a public charity and are available through a variety of sources including major brokerages such as Charles Schwab and Vanguard. Among the important benefits of using a Donor Advised Fund are:

• Ease of setting-up and administration. The DAF handles all administrative and regulatory requirements.

• Account minimums are low. For example, you can start a DAF at Charles Schwab with as little as $5,000.

• You can contribute cash or appreciated securities (provided they have been held for more than one year) and receive an immediate tax deduction, up to certain tax deductible limits.

• Once funds are received in the account, you can invest the dollars and direct grants at a later date and to the various organizations of your choice. Though not always required, you may need to give a minimum percentage away each year as directed by the fund.

• DAFs allow you to build a charitable legacy and potentially support charitable organizations beyond your lifetime and to extend your charitable funds to another generation within your family.

 

MAXIMIZE GIVING

One of the key benefits in contributing to a DAF is the opportunity to give during your high income years, rather than in retirement, and to receive an immediate tax deduction. Though you can give cash to your favorite causes, you can also give appreciated securities (stock and mutual funds) that are held over one year. This type of giving can provide you a deduction at the security’s fair market value, while avoiding the gain on the stock. This is a great way to rebalance your portfolio and/or reset your basis on highly appreciated securities.

As with most tax deductions there are limitations to your charitable contributions and you should always consult with an advisor prior to contributing substantial amounts to any charity.

 

ESTATE PLANNING

DAFs are also an effective tool for legacy and estate planning. Money contributed to a DAF at or prior to death, reduces your estate and avoids federal or state estate taxes, if applicable. Depending upon the size of your contribution or account, your heirs may be able to continue the management of the assets and your charitable legacy through their future giving.

 

STRATEGIC PLANNING

Charitable planning can include various strategies and Donor Advised Funds are one of the many effective ways to meet your charitable goals. At Soundmark, we are here to help you develop a plan and implement the strategies that are best suited to you and your family’s goals.

 

Todd Flynn, CPA, CFP ® is a Principal at Soundmark Wealth Management, LLC. Todd works closely with physicians, business owners, and other high-net-worth individuals to help them define their financial goals and implement an ongoing financial planning process.

The New Tax landscape

Do You Have a Trump Card for the New Tax Landscape?

KEY TAKEAWAYS Don’t make any major decisions while we’re in a wait-and-see mode. But, that doesn’t mean you should duck your head in the sand. See the helpful charts at the end of this post. Tax changes are not permanent and proposed tax changes may look quite different from what is actually signed into law. … Continued

Estate Documents

Do All of Your Family Members Have Their Estate Documents in Order?

KEY TAKEAWAYS Everyone 18 and older should have a General Durable Power of Attorney, a Medical Power of Attorney, and a Healthcare Directive. These documents will spare your family tremendous stress if you become seriously ill or incapacitated. Without proper healthcare directives in place, family members can be put in the uncomfortable position of trying … Continued

World sStock market performance graph

Fourth Quarter and Annual Market Performance Report

The Fourth Quarter and Annual Market Report has been posted for your review. In the Power of the Markets article included in this report, Dimensional Fund Advisors encourages investors to avoid working against the markets but rather, pursue an investment strategy that “efficiently and effectively harnesses the extraordinary collective power of the market’s prices.”

Trusts

Three Reasons to Consider a Different Type of Trust in Your Estate Plan

KEY TAKEAWAYS Generation Skipping Trusts also sometimes referred to as Dynasty Trusts, provide more flexibility than a typical will or trust, including the ability to change beneficiaries at a later date. Instead of liquidating a trust during the initial beneficiaries’ lifetimes, a trust can be sustained for future generations. Look for trust structures that protect … Continued

Plan Limits table

2017 Qualified Retirement Plan Limits Announced

The IRS qualified retirement plan limits for 2017 have been announced and the maximum elective deferrals and catch up to a 401(k), 403(b) and 457(b) retirement plan remain unchanged. The maximum deferrals for 2017 are $18,000 and if you are 50 years old or older, you can make an additional catch up contribution of $6,000.

String tied around finger

Required Minimum Distribution (RMD) Reminder

The end of 2016 is quickly approaching. If you are 70.5 years old (or older) or you are the owner of an Inherited IRA, you are required to take a minimum distribution from your IRA before December 31, 2016. If you are a first-time RMD taker, you have the option to delay your 2016 distribution … Continued

Checklist

Year-End Planning

If you have not started preparing for year-end planning, review Soundmark Wealth’s tax planning strategies. If you have any questions or would like a second opinion on your current strategy, give us a call and we can discuss an effective game plan for your situation.

Vanguard logo

A Foolproof Approach to Investing

Vanguard examines the partnership investors have with the markets in relation to an uncertain future. They conclude that “not only can saving more give you a greater sense of control over your investment plan, it can help compensate for long-term returns that, in our estimation, could fall short of historical averages.”  We could not agree … Continued

John Keynes

Listen to Keynes

Economist John Keynes was an investor with a unique view of the markets during the Great Depression. Jason Zweig shares some of John’s thoughts from his book that was published in 1936, The General Theory of Employment, Interest, and Money. His investment behavior and views may have looked foolish and hazardous at the time, yet … Continued